Flashcards in Making Operational Decisions Deck (33):
What are operations?
The business function that organises, produces and delivers the goods and services produced or provided by a business. It is the key function that transforms resources into finished goods (a physical product) and services (a solution or utility)
What does the production process involve?
Involves a business using its resources (e.g. raw materials, finance and the skills and knowledge of its workforce) to produce goods and provide services that customers can buy.
What is the production process?
What is job production?
One-off or bespoke products
Focus on customer needs and individual service
Specialist skilled workforce increases costs
High profit margins
Longer production process
E.g. a house extension
What is batch production?
Larger volumes than job production
Some flexibility (e.g. different flavours)
Some levels of automation
Productivity reduced when switching between batches
E.g. a batch of cupcakes
What is flow production?
High volumes and low margins (with high productivity)
Low skilled workforce
Highly automated process
Setting up expensive machinery increases costs
E.g. a mass-produced laptop 💻
How can a business have a competitive advantage with production?
Operations is linked to productivity, flexibility, cost and quality. For example, if a business can provide custom products and services, this will make their products more desirable to customers. Similarly, controlling production costs can allow a business to lower prices or increase profit margins.
What are some examples of technology used in businesses’ production processes?
Computer-aided design (CAD)
Supply chain management (SCM)
Geographical positioning systems (GPS)
Electronic point of sale (EPoS)
What are the benefits of technology on operations?
Speeds up the production process
Keeps businesses in touch with their customers
Lowers production costs
Ensures fewer mistakes and defects
What are the disadvantages of technology on operations?
Can involve a costly initial investment
Can quickly become obsolete
Requires employees to be trained to use new technology
What is productivity?
Is output per worker. It measures how much each worker produces over a period of time. Increasing productivity leads to greater competitiveness in a market. Productivity can be improved by increasing output or by lowering the costs of production (inputs) while maintaining output.
What is economies of scale?
A term that describes the situation where the average costs of production fall as the volume of production increases. This is an advantage that businesses gain as they grow in size.
What factors affect the choice of technology?
What is the maximum stock level?
The most stock that a business can hold
What is the re-order level?
The level of stock at which new stock will be ordered by the business. The difference between this level and the point at which stock increases is the time it takes for the stock to arrive.
What is the buffer stock?
(The minimum stock level) is the lowest amount of stock the business will hold. It is a safety net in case there is a surge in demand.
What is Just In Time (JTI)?
JTI stock control is a stock management system where stock is delivered only when it is needed by the production system, and so no stock is kept by a business. For JTI to work, a business must have good relationships with suppliers, a well-organised production system, and regular demand for their products.
What are the benefits of holding stock?
Any unpredicted surges in demand can be met
Damaged goods can be replaced
Businesses can receive discounts for bulk buying
Limited risk of problems supplying customer demand
What are the benefits of holding little or no stock?
Cost saving in not having to store stock
Less chance of damaged or stolen goods
Employees can focus on tasks other than managing stock
Can reduce costs of production, which makes product pricing more competitive
What makes a good supplier?
A good price (value for money) on products and delivery
Discounts for large orders
Availability of products (short lead times)
What are logistics?
The organisation and management of the transport of raw materials and goods
What is the impact of logistics and suppliers on a business?
Flexible suppliers can help a business meet customer needs more easily
Late deliveries can hold up production
Poor quality can lead to dissatisfied customers and products being returned
The service provided by a supplier can directly influence the reputation of the business that uses its products
Securing good contracts and supplier agreements can help a business achieve economics of scale as it grows
Using a supplier to deliver products directly to customers can be risky if they are not reliable
What is quality control?
Quality control is seen as one part of the chain of production. A quality controller will examine and/or test for quality once a product has been made or a service has been delivered
What are the two ways of achieving good quality in business?
Quality control and quality assurance
What is quality assurance?
Quality assurance involves focusing on quality at every stage of the production process. Everyone is involved and is responsible for contributing to the achievement of a quality standard. As a result, there should be zero defects
What is the benefit of good quality?
Good quality allows for a premium price to be charged.
Good quality builds a strong brand image.
Good quality is closely linked to meeting customer needs and can help provide a competitive advantage.
Quality is a way of differentiating a product.
Quality also ensures there is less waste because there are fewer faulty products, which helps businesses to control their costs.
What does a quality assurance system require a business to do?
Have quality as the focus of every process
Involve customers and suppliers at the design stage
Aim for zero defects
Have quality as the responsibility of every employee
Have managers who ensure there are systems in place to assure quality
Meet a quality standard, such as ISO 9000
Make good quality part of the business’s culture, so it is something everyone aims for and is involved in.
What does good customer service lead to?
Satisfied and loyal customers
Positive brand image and reputation
Differentiated products with a competitive advantage
Increased sales and repeat purchasing
What does poor customer service lead to?
Poor customer satisfaction and low customer loyalty
Poor brand image
Inability to differentiate products and to charge premium prices
Falling sales and repeat purchases
What does the sales process identify?
Identifies the key stages of buying a product or service that contribute to customer satisfaction. This means that it is an important part of providing excellent customer service.
What is the sales process?
1) customer interest
2) speed and efficiency of service
3) customer engagement
4) post-sales service
5) customer loyalty
Depending on the product or service being sold, what does a business need to consider?
The product knowledge of its sales staff
The speed and efficiency of its service
Customer engagement with its products
Its responses to customer feedback
The post-sales service that it provides